Loan Early Settlement - Interest Refund?

Chrysalis

I have the same question, and is an existing loan, the advice to check the balance I think is wrong, as the balance showing on my loan clearly includes interest.

I calculated the total amount of remaining monthly payments and it exactly matches the remaining balance. So tesco loans dont show the remaining balance minus interest.

BoGoF

Ask them for a settlement figure then.

I know when they send annual statements Tesco show the amount owing.

dano17439

I don't know why people try to work this out. Just give your lender a ring and ask what the settlement figure is. By far the easiest way

phillw

Chrysalis wrote: »

I have the same question, and is an existing loan, the advice to check the balance I think is wrong, as the balance showing on my loan clearly includes interest.

I calculated the total amount of remaining monthly payments and it exactly matches the remaining balance. So tesco loans dont show the remaining balance minus interest.

If they are showing daily or monthly interest then:

The balance should include the interest that has accrued from previous months, you owe that and can't get it back.

The balance shouldn't include the interest for the remaining months. You will owe that if you carry on with the loan, or if you pay it all off then you only have to pay a further two months interest.

In the old days it was common for lenders to front load the entire interest at the beginning. This gave the advantage that you always knew how much you had left to pay. At some point I think lenders tried to say that if you paid it off early then you still owed it, but that was found to be unfair and they were told they had to refund it. Door step lenders were often operated in this way, if you missed a few payments they'd persuade you to refinance the debt by creating a new loan which meant they lent you the money for the interest that you technically didn't owe yet and then charge you more interest. Decent lenders don't tend to work like that. Someone might have told you about this type of lender and you're trying to apply it to Tesco's, it's probably not applicable.

Gaz83

phillw wrote: »

The balance should include the interest that has accrued already, you owe that and can't get it back.

The balance shouldn't include the interest for the remaining months. You will owe that if you carry on with the loan, or if you pay it all off then you only have to pay a further two months interest.

A lot of loan providers show the 'balance' as the amount that is still to be paid assuming the loan runs its full course.

phillw

Gaz83 wrote: »

A lot of loan providers show the 'balance' as the amount that is still to be paid assuming the loan runs its full course.

Pay day/door step sure, but I've not experienced a bank doing it.

Regardless, my reading of the OP is that they don't expect to see any interest at all included in the balance & if they pay it off early then they shouldn't be charged any interest at all.

The quoted figure of £32,952.12 wouldn't surprise me. Most of the monthly payment is servicing the interest, only about one hundred pounds is taking off the capital.

foxy-stoat

dano17439 wrote: »

I don't know why people try to work this out. Just give your lender a ring and ask what the settlement figure is. By far the easiest way

Because the people dont read the loan agreements and have no idea what they signed up for....only read limited phrases on the internet and they think that saving money on interest (by settling early) means refund of interest already paid.

Crazy times